Analysts say the Central Bank of Nigeria’s (CBN)’s newly introduced Electronic Foreign Exchange Matching System (EFEMS) is a positive step towards greater transparency and efficiency in the foreign exchange market.
The CBN introduced new guidelines for foreign exchange trading through its EFEMS which took effect on Monday.
“It means that the CBN is making efforts to make the market more transparent and liquid. By mandating banks to show their real-time quotes and matching order, supply to available rates according to market reality, it should promote a fair and robust FX market,” an analyst, who wants to remain anonymous, said.
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The new guideline is expected to improve transparency, efficiency, and compliance in Nigeria’s foreign exchange market.
The apex bank mandated a minimum trade value of $100,000. The platform is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations.
Babajide Babatunde, a deals advisory and tax expert, said EFEMS is a game-changer that can bring transparency and efficiency to foreign exchange trading in Nigeria and hopefully solve some of the nation’s FX problems.
Babatunde said that the move by the CBN to digitise forex transactions is part of reforms the Yemi Cardoso-led apex bank has introduced to bring stability to the forex market and ensure better systems.
“Traditional systems face inefficiencies, speculative trading and limited transparency, contributing to market distortions. EFEMS is designed to enhance governance, transparency, and a market-driven exchange rate,” Babatunde said.
The naira, Nigeria‘s currency, has continued to fall across official and unofficial foreign exchange (FX) as speculators continue to taunt the market.
Since the naira was devalued last year, it has lost over 70 percent of its value, making it one of the worst performing currencies in the world due to a number of reasons such as poor supply of dollars, poor oil production and FX speculations.
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Buying or selling currencies to make profit is known as forex speculation.
Kayode Bamidele, a tax auditor, said on LinkedIn that the EFEMs aims to establish some sort of central clearing house for forex transactions rather than solely on digitisation of FX. “It’s long overdue, provided it’s implemented correctly.”
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